Normal shipping in Strait of Hormuz still months away, say experts

Shipping activity through the Strait of Hormuz remains subdued despite easing tensions, with experts expecting normal operations to resume only after de-mining and security measures are completed

Shipping through the Strait of Hormuz remains subdued despite the US-Iran peace deal signed two weeks ago, with experts estimating it could take another three months for operations to fully recover

 

The strait, the only maritime route to countries from which India imports oil and gas, had been subject to blockades and restricted movement over the past four months, triggering global energy shocks, a cooking gas shortage and fuel price hikes in India.

 

With the security situation gradually improving after attacks on vessels that killed several Indian seafarers, India’s maritime regulator last week withdrew its earlier restrictions on deploying Indian seafarers in the region.

 

“Considering the latest security situation in the Gulf region...the Directorate clarifies that there is no restriction for Indian ship owners/managers/RPSL agencies to continue the operation of ships and deployment of Indian seafarers in and out of Persian Gulf region by following the security protocols of the Coastal States and security agencies,” the Directorate General of Maritime Administration said in a circular. It, however, advised stakeholders to continue exercising caution.

 

According to shipping experts, outbound transits (eastbound sailings) continue to dominate traffic through the strait as shipping lines remain cautious. Peter Sand, chief analyst at freight intelligence platform Xeneta, said that before the conflict, inbound and outbound transits were evenly balanced across all vessel types, including containerships.

 

Between March and June, however, 60 per cent of all transits were outbound (eastbound), while the share rose to 63 per cent for containerships alone. Container vessels were also accorded lower priority than energy shipments during evacuation efforts by individual countries.

 

“As long as more ships are ‘escaping’ the Arabian Gulf than entering it, there is no normalisation of seaborne trade in the West Asia region, particularly through the Strait of Hormuz,” Sand told Business Standard.

 

 According to Xeneta, any return to normal operations could take around three months, as the US-Iran agreement does not immediately reopen the strait.

 

“Articles 4 and 5 of the Memorandum of Understanding address the US naval blockade and Iran’s obligations not to disrupt traffic, but the agreement sets a 30-day window for minesweeping operations — it may well take much longer. Until those operations are complete, safe and broad-scale transit through normal ship separation schemes cannot resume,” he added.

 

Shipping lines are seeing resumption but continue to proceed cautiously. Japanese shipping giant Mitsui OSK Lines (MOL), which operates 13 Indian-flagged vessels, told Business Standard that it would refrain from commenting on the navigation status or operational measures of individual vessels for safety and security reasons.

 

An executive at French carrier CMA CGM said one of its vessels, the French-flagged CMA CGM Galapagos, successfully transited the Strait on Sunday.

 

“The Group continues to closely monitor developments in the region and remains fully mobilised to ensure the safety and security of its crews,” the company said.

 

Freight rates on major maritime routes have surged by as much as 197 per cent since the conflict began. In India, container freight rates to West Asia rose nearly tenfold at the peak of the conflict.

 

“Spot rates will keep climbing for as long as the Strait of Hormuz is not fully open,” Sand said. “That could be four more weeks or longer depending on how complex the de-mining operation turns out to be.”

 

Meanwhile, despite reports suggesting that ships may be required to pay a toll for transiting the strait, experts said there has so far been no evidence of such charges being levied. They added that international law does not permit the imposition of transit tolls in the Strait of Hormuz.